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The Day Bitcoin Became Electronic Money

The Day Bitcoin Became Electronic Money

Ten years ago, coder and cryptographer Harold Thomas Finney II, more commonly known as Hal Finney, posted the first known Tweet about Bitcoin, telling the world that he was “running Bitcoin”.

Running bitcoin

— halfin (@halfin) January 11, 2009

The Bitcoin genesis block was mined on 9 January 2009 by Satoshi Nakamoto, bringing the first 50 Bitcoins into existence. It took 3 full days before the first Bitcoin transaction took place on 12 January in block #170, when Satoshi Nakamoto sent 10 Bitcoins to Finney, who was one of the earliest, if not the first, to start running a Bitcoin node.

This 10 Bitcoin tip is worth USD 36,500 today. Notably, the first Bitcoin transaction included a zero transaction fee, since the block size was 0.49 kb and had only 1 transaction, as opposed to modern-day blocks that often exceed 1,000 kb and have thousands of transactions competing to get into the block.

During the time between the genesis block and the first Bitcoin transaction, 169 blocks were mined, generating 8,450 Bitcoins worth USD 30.8 million at the current exchange rate. Back then, Bitcoin had no exchange value. Some people have called this a pre-mine, but Satoshi did give sufficient warning of Bitcoin’s launch by releasing the white paper to the CypherPunk mailing list months earlier on 31 October 2008.

Many people know about the first Bitcoin transaction between Satoshi and Finney, but little is said about the second Bitcoin transaction, which occurred in block #181 about 3 hours later. Based on the blockchain record, Satoshi sent 10 Bitcoins to another wallet, from the same wallet which he sent the first Bitcoin transaction with.

A 1 Bitcoin transaction was then sent in block #182 from the same wallet. This was the first time there were transactions in successive blocks, and the 3rd Bitcoin transaction in history. The 4th Bitcoin transaction was sent in block #183, and was very similar to the 3rd. The 5th Bitcoin transaction, which occurred in block #187, involved sending the Bitcoin from the 4th transaction to another address. Likewise, the 6th transaction in block #221 sent the Bitcoin from the 3rd transaction to another address. It seems like these transactions were simply done to test that Bitcoin was working properly.

The Bitcoin address 12cbQLTFMXRnSzktFkuoG3eHoMeFtpTu3S holds an important place in Bitcoin history, since it is the address that sent the first 4 Bitcoin transactions in history. This address sent its last transaction at block #248, and Satoshi left 18 Bitcoins worth USD 114,000 in the address that sit there to this day. Due to the importance of this Bitcoin address, people have sent numerous transactions into it over the years, adding up to 0.4305 Bitcoins worth USD 2,700.

After this flurry of activity on 12 January, Bitcoin went quiet until block #496 on 14 January, when 61 Bitcoins were sent. This shows how quiet the Bitcoin network was in the early days, with entire days without transactions, unlike currently where several Bitcoin transactions occur per second.

There are numerous Bitcoin birthdays, 31 October 2008 was when the white paper was published, 9 January 2009 was when the Bitcoin network activated, and 12 January 2009 can be considered the first day Bitcoin became electronic money, since that is when the first transactions occurred.


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2.26 MB Bitcoin Block Sets Record for Block Size

On 5 September 2018, the all-time record for Bitcoin block size was set when a 2.26 MB Bitcoin block was mined at block height 540,107. This record block size was made possible by Segregated Witness (SegWit) and transaction batching.

Before the deployment of SegWit in August 2017, Bitcoin block size had a hard cap of 1 MB. SegWit was implemented in response to scalability concerns due to increasing usage of Bitcoin, since there were concerns that 1 MB blocks would not be able to fit all recent transactions, which could lead to rapidly rising transaction fees.

With SegWit, the Bitcoin block size limit was re-dominated to be in terms of units instead of bytes. Signature data, called the witness, is separated from the Merkle Tree of a transaction and added to the end, and each byte of signature data only counts as a fourth of a unit. Therefore, if a block consisted purely of signature data, the block size would be 4 mb, so this is now the upper limit on Bitcoin block size. However, the Merkle Tree transaction data accounts for most of the block size, and Bitcoin blocks are rarely larger than 2 MB. The first Bitcoin block over 2 MB occurred on 20 January 2018 at block height 505,225, and weighed in at 2.17 MB.

One thing peculiar about this record-setting 2.26 MB Bitcoin block was it only had 230 transactions, as compared to an average block which has a size of 0.804 MB and 1,609 transactions. Likewise, the 2.17 MB block on 20 January only had 225 transactions.

These large blocks with low transaction counts are likely the result of transaction batching. Essentially, batching is when several transactions are merged into a single Bitcoin transaction. This saves space relative to sending each transaction separately, but the batched transaction can become quite large. The record for a batched transaction is 13,107 outputs, and it is estimated that as of May 2018, only 12% of Bitcoin transactions are batched, but they account for 30-70% of Bitcoin volume.

Indeed, when looking through the transaction ledger for this record 2.26 MB block there are numerous batched transactions. Although the official transaction count for the block is 230, it is actually far more, and could be near a record if you count each input or output in a batched transaction as a transaction. Especially combined with the knowledge that batched transactions take up less space per input or output, yet this block was of a record size. Therefore, this record block is a good example of how batching and SegWit can combine to bring Bitcoin scalability to new levels.


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